This document discusses end-user financing options that Futurepump, a company providing solar irrigation pumps to smallholder farmers, tested in Kenya over four years. It describes different types of external financing like formal financing through banks, semi-formal financing through microfinance institutions, and informal financing through loans from friends and family. It also discusses internal financing options like in-house financing directly from Futurepump and partner financing through solar companies. The most successful approach was partner financing through SolarNow, though no single option was a perfect solution and end-user affordability remained a challenge. Lessons included the importance of financing in business planning and the potential role of donors in filling gaps.

1. NAVIGATING THE COMPLEXITIES
OF END-USER FINANCING WITH
FUTUREPUMP: AN INNOVATOR
CASE STUDY

2. 02
CONTENTS
TYPES OF END-USER FINANCING 1
EXTERNAL FINANCING 2
Formal Financing 2
Semi-Formal Financing 3
Informal Financing 4
INTERNAL FINANCING 5
In-House Financing 5
Partner Financing 7
LESSONS LEARNED 8
KEY CONSIDERATIONS 9

3. 1
NAVIGATING THE
COMPLEXITIES OF END-
USER FINANCING WITH
FUTUREPUMP: AN
INNOVATOR CASE STUDY
Perhaps the most critical part of any company’s success is having customers
who not only want the services and products it offers, but are also able to pay for them.
Affordability is a particularly thorny challenge for the innovators supported by
Powering Agriculture: An Energy Grand Challenge, whose end users are typically
smallholder farmers in developing countries. These customers often lack the cash to
pay for products and services or lack access to bank credit or loans due to structural
inefficiencies in the markets where they live. For companies operating in these
environments, navigating the complexities of end-user financing may ultimately
determine their failure or success in the market.
For more than four years, Powering Agriculture supported Futurepump’s testing of innovative financing
options in Kenya to help bring solar irrigation pumps to the country's lowest-income smallholder farmers.
Futurepump investigated and employed several finance options, both external and internal, in the East
African market during this period. Their lessons gleaned from these experiences may help future
innovators seeking solutions for end-user financing of productive use assets in emerging markets.
Futurepump (futurepump.com) designs, manufactures, and distributes affordable solar irrigation
pumps to serve smallholder farmers in sub-Saharan Africa. The pumps are less expensive, cleaner,
and more sustainable alternatives to costly and polluting petrol or diesel pumps. Futurepump also
offers remote performance monitoring of its pumps at no extra cost, enabling users to monitor
pump utilization, including liters of water pumped, potential area integrated, fuel savings and
kilowatt-hours (kWh) produced. Futurepump has a field-testing station for trials of new product
designs in Kisumu, western Kenya.1

4. 2
TYPES OF END-USER
FINANCING2
External financing is provided by third parties, independent from the companies
that benefit from the transaction. There are three basic types of external financing:
• Formal financing. Money borrowed from regulated financial institutions (also called
bank financing).
• Semi-formal financing. Money that originates from microfinance institutions (MFIs)
and savings and credit cooperative societies (SACCOs).
• Informal financing. Money lent through moneylenders, family members, or friends.
Internal financing is provided as part of the company’s operating model. In this model,
the company becomes its own bank by extending credit directly to customers. The
enterprise retains full control over transactions and transaction terms, and is not
beholden to external market forces. There are two main types of internal financing:
• In-house financing. Companies’ partners (e.g., distributors, third-party sellers)
extend loans to customers.
• Partner financing. Companies’ partners (e.g., distributors, third-party sellers)
extend loans to customers.
External Financing
Formal financing. Customers borrow from financial institutions such as commercial or
investment banks or other organized and regulated groups such as specialized government
lending facilities. In theory, these institutions have the largest potential for providing finance as they
control a concentrated pool of capital that can be structured to meet market demands. Additionally,
these institutions are regulated, which provides borrowers with protection against extortionate
interest rates and unsavory collection practices. However, these loans are poorly designed for the
realities of cash flow, credit, and accessibility for smallholder farmers; challenges often arise through

5. 3
administrative burdens and difficulties with consumer credit checks. While financial institutions can
have deep pockets and offer protection to their borrowers, their loans are difficult to administer and
smallholder farmers find them difficult to access.
experience:
In July 2017, Futurepump secured an
arrangement with a financial institution in
Kenya to provide loans specifically for its solar
pumps. Since that time, any pump sold through
Futurepump’s main distributor has been eligible
for financing if the customer meets certain
qualifying criteria.3
Although Futurepump invested significant time
and resources in visiting its partner’s bank
branches, demonstrating the technology to the
bank’s staff, and training them to understand
the capabilities of the pump, only 12 pumps
have been sold under this arrangement to date.
Most of them were sold via bank transfers from
customers who already had a relationship with
the bank.
The low sales volume has not justified the commitment and resources invested by
Futurepump in establishing this financing mechanism. The low consumer demand
indicates that bank loans are still not suitably structured for smallholder farmers
if local branch managers and consumers alike are not well-informed on the design
and setup of the offerings. The formal financial scheme does not seem scalable at
present due to low sales volumes and high resource costs.
PARTNER BANK LOAN CRITERIA:••
• Must have an account with
a local branch or bank
statements from previous
banking relationships
• Must have proof of two
successful harvests
LOAN DETAILS/TERMS:••••
• Deposit: 30 percent
• Monthly payments: up to 24
• Setup fee: 5 percent
• Interest rate: 14 percent
Semi-formal financing. MFIs and SACCOs are financial institutions that operate much like traditional
banks but are more flexible and can offer informal mechanisms downstream on loan decision-making,
distribution, tracking, and collection. Often times, MFIs and SACCOs are designed to better serve the
needs of rural customers who live in remote areas far from traditional banks or who require more flexible

6. 4
and varied products than those found on the consumer finance market. In Kenya, SACCOs
provide savings and credit options similar to the services provided by cooperative credit unions
in developed economies.
experience:
Futurepump engaged the Kenya Union of Savings and Credit Cooperatives
(KUSCCO), which manages a fund that is loaned to SACCOs under KUSSCO.
In turn, SACCOs extend loans to their members at a below-market rate. These
loans are only available for the products and services of a few recommended
suppliers that have been vetted by KUSCCO. Futurepump is one of those vetted
technology suppliers.
Despite the promising features of this semi-formal institutional financing
arrangement, the partnership’s results have not been significant in terms of
Futurepump’s bottom-line sales due to a combination of several factors. The
greatest challenges have been getting Futurepump’s primary distributor to attend
and participate in KUSCCO-organized demonstrations, and KUSCCO wanting to
be part of all communications between its SACCO network and Futurepump to
avoid the possibility of being bypassed by KUSCCO in the process. These added
bureaucratic steps have created delays and miscommunications, which have
hindered sales. An additional challenge is that Futurepump must invest time and
resources into demonstrating its pumps to the SACCOs’ boards of directors for
approval before it can approach and market to member farmers directly. This has
added yet another step to the sales process and lengthened sales cycles.
Informal financing. Informal channels to finance can include moneylenders, family members, or friends,
whether individually or through unregulated social savings groups. While this type of financing exists in
all economies, it occupies a more prominent position when formal channels are ill-defined or
administratively difficult to access. In general, the less developed the country’s financial ecosystem, the
more prevalent the role of informal financing. While this form of financing can leverage intangibles like
personal reputation or trustworthiness due to one’s social ties (e.g., family, friends), there are drawbacks
in that the financing occurs outside regulated environments with little to no oversight of terms or
legalities. In the event of default and the lender’s need for recourse, informal channels can result in
negative social consequences to borrowers or even violence in extreme cases of retribution. Borrowers
are protected against these ills in formal financing arrangements.

7. 5
experience:
After partner financing (see page 7), Futurepump estimates that informal financing
is the second-most frequent financing mechanism its customers use to purchase
solar pumps. However, there is no way to distinguish between a transaction where
a customer pays cash and one where a customer pays cash that has been lent
to them through an informal external arrangement, making this activity difficult
to measure.
Internal Financing
In-house financing. In-house financing is a double-edged sword, giving companies more
control but adding the burden of credit risk management. Here, an enterprise extends
credit or loans directly to customers so they can purchase that same company’s goods and
services. While this type of financing allows companies to fully control transactions and make their
own credit decisions, it comes with the added pressure of needing to manage credit (repayment)
risk and correctly forecast losses from defaults so as not to run deficits in the cash they need for
day-to-day operational expenses.
experience:
Futurepump began offering in-house financing packages to customers purchasing
pumps in areas clustered around its western Kenya office in May 2015. Almost
immediately, the company began to see customers failing to make payments
on prearranged timelines. Noticing this negative trend, Futurepump introduced
an automated text message system to remind people of their payments due.
Unfortunately, this approach did not seem to have a meaningful impact on
increasing repayments. In July 2016 it became apparent that a significant
proportion of customers were behind on their payments. A new process was
implemented in which the automatic text messages were stopped and instead
monthly calls were made to all customers who were behind on their loans.
During those calls, customers were asked for a specific date when they would be
paying. In cases where the customer was unable to make that month’s payment,
achievable actions were agreed on and no penalty was applied.
The more personalized approach had a significant positive impact on the
regularity of payments and improved the relationship between Futurepump and its

8. 6
its customers. The customers on finance before July 2016 made an average of
35 percent of the payments from May 2015 to June 2016. This percentage rose
to 80 percent for payments due from July 2016 to February 2017.
Through Futurepump’s increased involvement, the field team realized that
there was confusion among some customers regarding the loans themselves,
the mechanics of how they worked, how interest was charged and applied, and
how payments should be made. There was added confusion in the market as
some customers saw Futurepump as a non-governmental organization or
charitable organization (rather than a for-profit company) and felt less inclined
to pay for the pumps.
Futurepump end users with their solar-powered pump (left) and pumped water stored for irrigation (right). Photos courtesy of Futurepump.

9. 7
Partner financing. In this type of “internal” financing, a firm – often a distributor or third-party
seller rather than the technology provider – extends its own in-house financing to customers,
allowing them to purchase goods or services. Similar to straight in-house financing, this model
eliminates distributors’ reliance on the financial sector for providing the customer with funds to
complete a transaction. However, they must then rely on the partner organization to have
established the provision of finance as a core competency. This means that the firm typically
offers the financing as an additional value-add service to the cost of the equipment itself.
experience:
Futurepump has been working with
SolarNow in Uganda and Kenya. SolarNow
purchases pumps directly from
Futurepump’s primary distributor via its
dealer program and then offers the pumps
for sale on flexible credit terms. SolarNow’s
loans are specifically designed for low-
income rural customers purchasing solar
products. It competes with traditional
financing channels through better customer
knowledge gained by building relationships
so that the customer experience is
more personalized. This is evidenced by
SolarNow’s ability to provide attractive
financing products that are easy to obtain
and have flexible terms.
Partner financing has proven to be the most successful model Futurepump has
found in the Kenyan market. While the model heavily depends on the willingness
of distributors and sellers to act as banks, it has allowed Futurepump to refocus
its efforts on its core competencies of manufacturing and supplying innovative
solutions to the market. In this case, SolarNow has chosen to emphasize financing
as a core competency in which to build expertise. Not every organization will want
or be able to make the same decision, making partnerships like the one between
Futurepump and SolarNow so noteworthy.
SOLARNOW
SolarNow is a for-profit business
with Dutch origins. Its goal is
to transform lives by providing
high-quality energy solutions
in Uganda and Kenya. The
company offers solutions to
residential, commercial and
industrial customers, packaged
with financing options allowing
for payment in monthly
installments.4

10. 8
Lessons Learned
The most successful financing mechanisms proved to be those linked directly to distributors,
particularly partner financing with SolarNow. Even so, Futurepump believes there remains a place for
improved formal and informal lending in the productive use product market targeting base-of-the-
pyramid end users – the four billion people worldwide living at the bottom of the economic pyramid.
A key lesson from Futurepump’s experience is that a product’s price point is still critical, even when
financing packages are available. If the asset price is too high, farmers are unlikely to be approved for
loans that are large enough to cover the price of the asset and are equally as unlikely to want to take
on those levels of debt. This is particularly an issue for young markets and new technologies, such as
solar water pumps in Africa, where customers have been exposed to few, if any, positive examples of
the technology in action.
Adoption of the technology solution also implies a potentially significant departure from historical
farming practices, introducing yet another element of risk. The perceived risk is further compounded
by end users’ general lack of trust in financial institutions. For smallholder farmers in particular,
taking on additional risk is challenging to justify as they are already managing risks inherent to their
work, such as weather patterns, crop disease, market pricing volatility, and demand variability.
For companies looking to succeed in emerging markets,
end-user financing must be appropriately factored into
business plans and financial models. Companies who
can navigate this challenge by providing solutions
at affordable price points with accessible end-user
financing options available will have a leading advantage
in the markets they intend to serve.
Renewable energy technology
providers should consider several
financing types and choose the one
best suited to them, be sensitive to
end-user price points and risk
aversion, and factor financing into
their business planning.
The Futurepump SF1 solar-powered water pump for irrigation. Photo courtesy of Futurepump.

11. 9
Key Considerations•••••
In-house financing is not an easy service add-on; to be successful, it must be a core competency.
Companies should consider carefully whether they have the resources and acumen needed to
appropriately integrate in-house financing into their business offering.
Repayment and repossession policies are delicate considerations, especially for donor-funded and
mission-driven businesses. For in-house financing to work, companies need to think carefully about
how to ensure repayment rates and if/how they will be able to recover an asset in cases where end
users fail to repay. The repossession of assets that may be supporting the livelihoods of end users at
the base-of-the pyramid may be uncomfortable at best, and catastrophic to a company’s public image
at worst.
Strategic partnerships are an effective solution, but pose the risk of partners not having the same
growth and scale ambitions or capabilities. Companies should carefully consider whether external
financing partners, like financial institutions, distributors, and microfinance institutions, have the ability
to provide financing to meet end-user demand as well as the ability to grow and evolve in parallel with
the technology company.
Donors could fill a critical gap. In emerging markets, current options for end-user financing are still
inadequate to address farmers’ overall needs. This may present an opportunity for donors to fill the void
through a combination of providing guarantees to lenders, introducing donor established and locally
managed financing facilities for end users, supporting existing financial intermediaries focused on
solving this problem (e.g., Root Capital, Grameen Bank), or opening direct credit windows for companies
to access when moving financing in-house, to name a few.
Each market is different, and companies must conduct their own business model discovery. Although
end-user financing has been widely discussed over the last ten years, it was still necessary for
Futurepump to explore and test available options. While it is important to learn from previous
experiences such as Futurepump’s, this is not a substitute for gathering firsthand knowledge from the
market.

12. 10
REFERENCES
1. “About Futurepump,” About Us, Futurepump, https://futurepump.com/about-us/.
2. Jacob Winiecki, Ellen Morris, and Niki Armacost, End-user finance: A guide for sustainable
energy enterprises and NGOs, (London: The Ashden Awards for Sustainable Energy, 2009),
https://www.energy4impact.org/sites/default/files/enduser_finance_guide_final.pdf.
3. Interview with Futurepump employee, November 2019.
4. “What We Do,” Our Story, SolarNow, https://www.solarnow.eu/our-story/.
This case study was made possible through the support of the Powering Agriculture: An Energy Grand Challenge
for Development Partners, comprised of the United States Agency for International Development (USAID),
the Swedish Government, the German Federal Ministry for Economic Cooperation and Development (BMZ),
Duke Energy, and the Overseas Private Investment Corporation (OPIC).
Further information about Powering Agriculture can be found at PoweringAg.org
DISCLAIMER
This case study is made possible by the support of the American People through the United States Agency for
International Development (USAID). The contents of this case study are the sole responsibility of Tetra Tech ES,
Inc. and do not necessarily reflect the views of USAID or the United States Government. It was prepared by
Tetra Tech ES, Inc. under the Powering Agriculture Support Task Order.
AUTHORS
This case study was written by Jeff Engell and Christina Tamer of VentureWell (subcontractor) with significant
input from Helen Davies of Futurepump and revision by Wynne Cougill of Tetra Tech ES, Inc. under the
leadership of Dr. Augusta Abrahamse, Program Manager of Powering Agriculture: An Energy Grand Challenge
for Development.